Black Friday 2015: Europe warned of online fraud and chargebacks threat

Europe’s leading risk mitigation specialist advises individuals and online retailers to prepare for Black Friday and Cyber Monday, as higher sales can mask rising online fraud and chargebacks.

Global Risk Technologies, a leading technology firm specialising in risk mitigation, fraud management and chargeback solutions, is warning individuals and online retailers to be aware of hidden threats in the upcoming shopping extravaganza of Black Friday (27th November). Experts are predicting it to create the first ever £1 billion UK shopping day, but it’s not all good news.

83 percent of people in the UK are now aware of the Black Friday phenomena, with many turning towards convenient online shopping channels offering rewarding discounts. 2014 saw a 4.5 percent drop in department store sales, while online sales across Europe are expected to grow by over 18 percent through 2015. Booming sales may be great on the surface for merchants, but masks increasing online fraud and chargebacks.

Chargebacks in the past have acted as a form of consumer protection to provide remedy to individuals who have been victims of identity theft, merchant errors or unethical business practices. However, an increasing number of chargebacks are fraudulent, with some consumers obtaining products without paying for them – a process known as friendly fraud. On a retail day where normal shopping behaviours are put aside, finding and stopping friendly fraud from Black Friday sales is like finding a needle in a haystack.

“Online merchants should pay close attention to transaction disputes as part of their risk management strategy, because high chargeback rates are frequently a sign of retail fraud,” warned Monica Eaton-Cardone, CIO and co-founder of Global Risk Technologies.

“Beyond losing merchandise and profits, Internet retailers can face additional fees and consequences in relation to chargebacks, particularly if they exceed the 2 percent threshold set by acquiring banks. Our goal in pinpointing locations with higher-than-average chargeback rates is to allow merchants to perform due diligence on orders originating from or shipping to those cities.”

To help online merchants eliminate Black Friday fraud and chargebacks, Monica Eaton-Cardone has provided some tips for incoming orders:

• Require a Card Security Code: For all credit card orders, be sure to obtain a valid card verification code (CVC). Not only does this help prevent cybercriminals from placing fraudulent orders with stolen card data, but it can serve as valuable evidence in a chargeback dispute.
• Collect and Compare IP Addresses to Physical Addresses: By capturing a customer’s IP details, merchants can identify the physical location associated with an IP address and confirm if it matches the billing and/or shipping address. This information can be used to flag suspicious orders as well as help prove the legitimacy of a disputed transaction.
• Use Both Automated and Manual Analysis: Manually approving all transactions can be costly and time consuming, while automated systems may decline legitimate orders or miss potential fraud. For optimal results, choose a risk management solution/partner that combines both advanced technology and human expertise.

Chargebacks traditionally hit retailers in the new year, by which time the joy of pre-Christmas sales gives way to fear and fines that put a dent in profits. Retailers can minimise risks by implementing the correct fraud prevention methods before chargebacks hit. The key is to understand the reasons why chargebacks occur and having the best practices, processes and technology in place to combat instances of fraud.

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